If you’re on the hunt for sensible ways to make money and live the lifestyle that you deserve, it might seem like there are very few dependable options. One tactic many people consider is whether real estate is a good strategy for quickly building up wealth. Whether you’re interested in an entrepreneurial house-flipping business or just curious about investing in a real estate project, you’ll want to know how to do it wisely. Before we answer the titular question, we’ve put together a list of pros and cons for you to consider before you take the plunge into real estate.
First, we’ll cover a few reasons why investing in real estate might be an enticing option.
- Real estate investing is a form of passive income (in some cases), so if you’re successful you won’t have to worry about clocking in and out – your check will simply be in the mail from your recent real estate deal, or from tenants renting out your property if you do choose to lease it. This makes property ownership a good option for retirees who are looking to augment their retirement savings with extra cash flow.
- Real estate is a reasonably steady, long-term investment option. Property values do tend to rise and fall (more on that in the Cons section), but over time, a good amount of real estate appreciates in the long-term. So, this may not be a quick route to riches, but it certainly could be a slow and steady one.
- It’s widely available in some growing areas. Parts of the country like Colorado, Nevada, and Texas are growing rapidly. However, they also have a lot of land. That means that there’s still plenty of room for your real estate investments to appreciate, making even riskier options like Fort Worth hard money loans actually seem somewhat attractive.
- Property is actually a tangible asset. Unlike investments in the stock market that serve no purpose before you sell them, property can actually be used. For instance, if you’re flipping a house to resell it, you can still live in it during renovations. Or, if you’re just waiting for property values to increase before selling, you can lease to renters and make some more income that way.
Now we’ll go over what you should be careful of before you get started investing in real estate.
- There are a lot of real estate scams. If you don’t do diligent research before investing, you could wind up with a property that rapidly depreciates or isn’t worth anywhere near what you paid for it. Be careful and do diligent research before putting your money toward any real estate investment opportunity.
- Real estate investing takes time. If you are looking for a way to make money quickly, purchasing a house in hopes that property values will increase could take a decade or more. House flipping might be an easier way to make money more quickly, but this requires significantly more time and investment, as you’ll have to renovate the home well enough to warrant a high asking price.
- Property management can be a headache if you can’t find good tenants. If you do go the leasing route, it’s important to find tenants who will respect your property and treat it well. The last thing you want on your list of costs is repairs necessary after troublesome tenants move out.
- A substantial amount of your net worth is tied up in your investment. If you find that you need money quickly, you might be in some trouble. Real estate is difficult to convert into liquid funds fast enough to cover a last-minute need for emergency cash. That’s because you’ll have to sell the property successfully to make your money back. Plus, if you have tenants, you might not be able to just evict them to liquidate in your property, further stalling access to funds.
So, is real estate a quick route to riches? In most cases, real estate is not a way to get rich quickly. That’s because, as with any investment, it can take time to fully appreciate. While flipping houses can be a good way to earn money, it’s not always easy to quickly get rich this way – in many ways, it’s like owning any small business, as the overhead costs are substantial and don’t allow for immediate profits. Let us know whether you’ve had any teachable experiences from real estate investing in the comments below!